Cornerstone OnDemand thinks big data can tell you who to hire

Imagine this scenario: Acme Corporation, a maker of farming tools, is looking to hire a salesperson for an important new role spearheading its fertilizer supply business.

Ralph, a long-time employee, is the No. 1 choice based on his seniority and tenure. But the search is incomplete. The company just doesn’t know it. Right under its nose is Cynthia, a relatively new employee who has consistently closed deals since starting her job and who previously worked for a big-time fertilizer company.

Cornerstone OnDemand thinks it has the solution to this employee-hiring problem facing Acme as well as the thousands of real companies that deal with similar issues. Its software helps companies sift through data to pinpoint people like Cynthia for job openings that would otherwise slip under the radar.

Founded in 1999, Cornerstone sells customers human-resources software that they can access via its cloud data centers on a subscription basis, and takes in $280 million in annual revenue. The company currently counts Hitachi, Princess Cruise lines, The Ohio State University, and Fruit of the Loom among its roughly 2,100 clients.

On Tuesday, the Santa Monica, Calif. company is slated to unveil a new data analytics service that essentially automates an organization’s hiring process and helps companies ensure that their staff is being adequately trained. The basic premise behind the new service is that companies generate lots of data about their staff, but have little time to actually parse through the information to learn anything meaningful.

For example, a company may track certain worker performance metrics like how well a particular employee’s last three sales negotiations turned out. Companies that fail to go through the information can miss out on learning how effective their workers are.

Cornerstone CSOD claims its new data service is much quicker and reliable way to sift through all the data companies retain about their employees. The technology can, in theory, recommend different jobs for certain employees based on their skills and flag anyone who needs more training.

At the heart of Cornerstone’s new service are machine-learning algorithms that the company acquired when it bought out the big data startup Evolv in October for $42.5 million. The concept of using machine-learning algorithms within the workplace is now a hot niche as businesses increasingly turn to algorithms and huge data sets to help their management make better decisions.

Evolv, which sold data-analysis software for recruiters at companies like XeroxXRX, bragged that its technology would help cut down on worker attrition and reveal the qualities that make for the best call-center workers. That technology is now incorporated into Cornerstone’s tools.

Using historical internal data, companies using the service can get information about 25 common employee-related issues and compare them against Cornerstone’s large data sets, explained Cornerstone vice president Jason Corsello. Workplace attrition rates, the best time of the week for employee training, and the kinds of potential hires who are likely to fail are just some of the topics that can be explored.

“This is a way to understand who your people are and how to make them more effective,” said Cornerstone CEO Adam Miller.

Businesses and their HR departments are increasingly interested in the type of data-analyzing services offered by Cornerstone and other companies as a way to hire better and maintain a well-trained staff, explained analyst Josh Bersin of Bersin & Associates, part of Deloitte Consulting. Companies maintain tons of data about their employees stored in their HR systems, but they don’t have any way to analyze that data without having to do it manually.

Cornerstone isn’t the only company touting the benefits of predictive analytics to help make businesses run better. For example, Santa Clara-based Palerra markets software that it says can recognize when an employee is up to no good. If workers peek into a particular sales database that they weren’t assigned to, Palerra’s software records the fact and warns management about the potential thievery.

What makes Cornerstone stand out, however, is the company’s enormous vats of client data that it’s obtained throughout the years. Miller believes this stored data will aid Evolv’s technology in learning new patterns and generating better predictions.

Still, we are a way’s away from being able to ask the software a specific set of questions and receive instantaneous answers, like something out of Star Trek. Users must choose from the set of predetermined queries.

“It’s a bit ambitious,” said Miller about eventually being able to ping the data on the fly and get an immediate answer about just anything. “I don’t think we are there now. Potentially over time, absolutely.”

The new data service is currently only available to select customers to test. But the company plans to roll out the service to the public later on this year. Cornerstone will charge companies based on how many employees they have and will be comparable to the company’s other products, although it will be a “little bit of a premium to what we generally do,” said Miller.

ZenPayroll raises $60 million from Google Capital, others

For the founders of ZenPayroll, a Silicon Valley startup that aims to automate the payroll process for businesses, it all started with family. Joshua Reeves, Edward Kim, and Tomer London each had close family members who managed people’s paychecks. They heard stories about how frustrating it could be to quickly add new employees to the system or manage the taxes around it, and knew that for most employees, payroll was an opaque process that required logging in to some forgettable internal system. So it was easy for the Stanford grads to agree to apply their ideas to the topic while at startup incubator Y Combinator.

What became ZenPayroll, which officially launched just over two years ago, gives small businesses a simple way to manage the payroll process on the web, much like how people now pay their bills online. The young company believes that existing systems from Paychex, Intuit, and ADP are too complex and don’t serve companies with fewer than 100 employees efficiently or cost-effectively.

Google Capital, the search giant’s growth equity fund, is putting $60 million into the company, along with existing investor Google Ventures and new investors Emergence Capital and Ribbit Capital. Sources familiar with the deal say this round of funding values the company at $560 million, which is up from $100 million at ZenPayroll’s last round of funding in 2014. This also marks one of the first deals where Google Capital and Google Ventures, its venture capital arm, invested in the same company.

What makes ZenPayroll so easy to use? Employers can set up the process in minutes, and the web-based software automates employee payments, tax calculations, and direct deposit. Employers can award spot bonuses through the system and allow employees to donate to charity. Employees can onboard themselves by entering bank account and personal information.

One-third of companies are fined for incorrectly doing payroll taxes, says Reeves, citing IRS figures. That can become a major headache for small businesses that lack the resources to manage it.

ZenPayroll’s customers, which include bakeries, flower shops, hotels, and churches, pay $25 per month plus $4 per employee per month. Reeves claims that ZenPayroll is at least three to four times more affordable than ADP or Paychex. For now, ZenPayroll is available in 47 states and Washington D.C. and plans to expand to the rest of the U.S. in a matter of weeks.

While it seems that a valuation of half a billion dollars in two years’ time is the new normal in Silicon Valley, ZenPayroll’s growth is what is attracting companies like Google to invest. The startup’s revenue has grown more than tenfold since last year, and it’s now processing billions of dollars in annual payroll for more than 10,000 small businesses across the country. That’s up from $400 million last year.

“This is the fastest growing company we’ve seen in a few years,” says Laela Sturdy, partner at Google Capital. She adds that while ZenPayroll will always continue to serve small businesses, there’s also a significant opportunity in providing simple services for larger businesses.

Reeves attributes the company’s quick recent success to being at the right place at the right time. “People would not have trusted putting all their personal information on the web ten years ago,” he says. “With email, online banking, and other paperless technologies, consumers are much more comfortable putting sensitive data in the cloud. We’ve benefited from that.”

The future of work: Say goodbye to HR?

When Deloitte revealed recently that it was redesigning its approach to performance management—hoping to fix a process that chews up nearly 2 million hours a year but yields crummy results—the professional services giant suggested that people might be surprised by “what we’ll include” in the new system “and what we won’t.”

As notable as the “what,” however, is the “who.”

Deloitte plans to give more tools, along with more of a sense of urgency, to individual team leaders so that they can conduct formal check-ins with all of their direct reports at least once a week.

“These brief conversations … provide clarity regarding what is expected of each team member and why, what great work looks like, and how each can do his or her best work in the upcoming days,” Ashley Goodall, Deloitte’s director of leader development, explained in the current issue of Harvard Business Review, where he laid out the initiative.

Deloitte is at the fore of a trend that is changing how major companies are managed: Team leaders are being offered—and, in some instances, simply seizing—more responsibility and autonomy in evaluating and guiding the people who work for them. As part of this movement, they are taking over functions that have traditionally been the province of corporate HR.

“We now have the opportunity to put power right into the hands of the team leader,” says Marcus Buckingham, who wrote the HBR article with Goodall and whose company, TMBC, has been advising Deloitte. (Full disclosure: Buckingham is a member of the board of advisors of the Drucker Institute, which I run, and he is a friend.)

Under the classic corporate hierarchy to which most businesses still adhere, HR centrally administers a performance evaluation once or twice a year. By the time feedback filters down to front-line managers, it’s often too backward-looking to be useful.

“The most important audience for this information is the person who doesn’t get any of it in a timely way—the team leader,” says Buckingham. “The real work of a company happens in microclimates.”

In the case of Deloitte, as well as other organizations using Buckingham’s methods, team leader check-ins are augmented by an initial online self-assessment taken by every member of the group. The instrument allows employees to explore and understand their strengths and share those insights with their supervisor and other colleagues.

Automated reminders then ensure that the team leader is given a weekly dose of data, making it possible for him or her to answer three questions shown to measure and help spur engagement and productivity: What are the strengths and capabilities of each of my people? What are they doing this week (and, implicitly, how does that match up with their strengths)? And how are they feeling this week?

Performance management isn’t the only activity undertaken directly by a growing number of team leaders. Goal-setting, surveying workers, training, and even hiring are increasingly being handled in much the same manner.

“There’s definitely a shift happening,” says David Hassell, the CEO of 15Five, a company that makes web-based software to improve communication between employees and their managers.

Two factors are fueling this transformation. First, pressure is rising for companies to move much faster than the typical corporate bureaucracy can facilitate.

For instance, athletic-gear maker Under Armour has turned to HireVue, an interactive platform for recruiting, screening, and hiring job candidates, to bring on staff as it opens new retail stores. But it’s the store managers themselves—with HR’s backing—who are making these selections. Through this decentralized arrangement, Under Armour has opened a new store in as little as two days, according to HireVue, and it has cut the time to fill jobs by 35%.

The second factor is a proliferation of technology. Indeed, while “there is no I in team,” there is ever more IT being deployed at the team level—some of it so cheap that managers can buy the stuff themselves without any corporate rigmarole. For example, 15Five costs $49 a month for the first 10 people, and $5 for each additional person.

The goal-setting application BetterWorks goes for only $15 per user per month. Kris Duggan, co-founder of BetterWorks, recalls the CEO of a financial services firm who at first saw little point in rolling out the product. But so many of his managers started using BetterWorks on their own that he eventually had no choice but to input his own objectives to keep them in line with everyone else’s. “It was definitely the lower ranks of the organization that was pulling the CEO in this direction,” Duggan says.

Of course, not every company is ready for their team leaders to assume such an assertive role; a top-down philosophy still prevails inside most large organizations. Nor does every team leader have the skills and mindset to successfully manage this way.

“You have these really fancy, awesome tools,” says Dan Pontefract, a longtime TELUS executive and the author of Flat Army: Creating a Connected and Engaged Organization. “But the culture has to be there first.”

It is also hard to imagine that some HR executives—afraid of losing their authority—won’t resist these changes.

But Buckingham believes that with team-leader-driven companies, HR officials will have the chance to be more valuable than ever. “Tim Cook recently commented that ‘the most important data points are people,’” Buckingham says. With team leaders tuned in as never before, “HR will finally be in position to have real-time and reliable people data,” as opposed to serving up figures that are “stale and untrustworthy.”

They’ll also be able to spot pockets of true excellence throughout the organization and try to replicate those. “Rather than having things centrally launched and cascaded down,” Buckingham says, “you’ll have them locally launched and aggregated up.”

Slowly but inexorably, the world of work is being turned upside down.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University. The author or editor of five books, he is currently writing a narrative history of how the social contract between employer and employee in America has changed since the end of World War II.

This is Google’s secret to making work less awful

If everyone in your office hates their job, you might turn to Google to figure out how to make everybody a little less miserable.

The Mountain View, Calif. tech giant’s Head of Human Resources, Laszlo Bock, is revealing his secrets for improving workplace happiness in a new book, “Work Rules!.” Among his pointers: Make sure people have goals and understand why those goals exist.

From the Wall Street Journal’s preview of Bock’s new book:

“Whether you’re talking about manual trades or computer science and teaching, there’s a sense that ‘I just gotta do my dumb job’—but it doesn’t have to be that bad,” says Mr. Bock, who speaks with the congenial urgency of a TED speaker or TV chef.

The way to make work better, insists Mr. Bock, is through transparency, goal setting, frequent performance reviews, and a less-hierarchical work structure that empowers employees to solve problems for themselves while encouraging them to critique their bosses just as often as they critique themselves and each other. Plus, as Mr. Bock emphasizes again and again in his book, it’s essential that you hire the right people—smart, conscientious, and humble. (Although some might argue with the notion of humility being Google’s strongest suit.)

Bock mentions grocery retailers Costco and Wegman’s as other companies that have followed Google’s lead.

When office gossip helps the bottom line

If corporations have learned anything in the era of social media, it’s that they can’t stop workers from tweeting, Facebooking, and Instagramming about their jobs. The web has even carved out special places for employees to trade office gossip without -repercussions. At Glassdoor, a repository of anonymous com-pany reviews and salary data, more than 27 million people have contributed information about their employers. Meanwhile, anonymous apps like Whisper and Secret, which surged in popularity last year, circulate juicy rumors about various startups, deals, and executives.

Naturally, that can be perilous for a corporation. Federal labor law protects employees’ rights to talk about things like wages, hours, and terms and conditions of employment, making it illegal for companies to interfere. When a damaging rant ricochets around the web, they can only react and respond.

A new service aims to capture the thrill of anonymous office gossip and harness it into something productive. Memo, which launched in January, has already accumulated 10,000 sign-ups from employees of about 1,000 companies, including Amazon AMZN, Deloitte, and Delta DAL. On Memo users post about work-from-home policies and doomed projects. A recent post from a PepsiCo employee called out the company’s planning (poor), work ethic (skewed), and management (oppressive). Another poster bemoaned an acquisition: “I loved my company until it was bought out by Honeywell. The only thing I like about Honeywell is my cubicle and a paycheck.”

Memo’s goal, according to CEO Ryan Janssen, is to surface all manner of vital information about a company, be it rumors, compensation trends, or problems with a strategy. It’s the sort of information everyone except management knows, because everyone is afraid of confronting his superiors. “The problem with companies isn’t that they don’t think the truth can help them,” Janssen says. “It’s that they don’t know the truth and aren’t acting on it.”

In the second quarter, Memo will begin selling advanced tools that allow companies to collect data on employee sentiment, moderate comments, and engage with workers on the app. It’s a big ask—employers surely aren’t amused by what they’re reading. But Janssen insists that this sort of radical transparency is inevitable and that smart companies will get ahead of it. “You can either become a transparent company peaceably, or your employees can open it up for you,” he says.

It wasn’t always this way. When Glassdoor launched in 2008, employers reacted with uncertainty and discomfort, according to CEO Robert Hohman. That has changed. “We live in a much more transparent world. Most employers recognize that public review of their company’s culture is the new normal,” he says. “You can’t put the genie back in the bottle.” The company, which is expected to IPO this year, minimizes wanton aggression by verifying the identities of users and asking them to leave pros along with their cons. The result? Most reviews are favorable. The average CEO approval rating is 67%; the average company rating is 3.2 out of 5.

Several forward-thinking companies already use internal tools for feedback. Squarespace, a New York web-development startup with more than 400 employees, collects anonymous feedback using Google’s survey tool. Kris Passet, Squarespace’s people relations lead, worries that the negativity on an app like Memo may not be productive. “There aren’t many proposed solutions, so it’s just a vacuum for venting basically,” she says. “That’s not very helpful.”

Ryan Smith, CEO of business survey provider Qualtrics, says his company’s internal feedback tool, which is not anonymous, surfaces problems just fine. “Anything that’s said [on Memo] is not going to be a shocker because we’re open with ourselves,” he says. That’s less likely at the large corporations where Memo has gained the most traction. Says Smith: “The old-school companies who have never addressed the feelings in their relationship—they’re going to struggle with that.”

How to complain: A primer

Chill

Too emotional to think clearly? Don’t try to. Take a breath, a walk, or a break until you’re grounded.

Confront

The best person to complain to is usually the offending party. Awkward? Yes. But it’s the fast track to a fix.

Change

Raise red flags only when you have solutions. Instead of losing rapport, you’ll gain respect.

Why Whole Foods, Dollar General, and Panera have all been sued over a tiny hiring technicality

When it comes to background checks—dare we say it—the devil is in the details.

Last week, Michaels Stores was slapped with a class action lawsuit in Missouri federal court that accused the craft store chain of violating the Fair Credit Reporting Act. Michaels is accused of breaking the law because it failed to properly disclose that a candidate’s consumer report might be obtained during the hiring process.

Don’t worry if you’re unaware of the FCRA, a little-known federal law that regulates how consumer reports—creditworthiness, criminal background reports, prior traffic reports—can be used. It comes into play when employers want to check the backgrounds of prospective employees. (Michaels did not return a request for comment.)

While the general public likely knows little about the FCRA, employers like Whole Foods, Dollar General, and Publix Super Markets are becoming intimately familiar with the law because—like Michaels—they are getting sued over it.

The FCRA was originally enacted in 1970 to protect the privacy of individuals’ personal information, as the credit reporting industry began assembling and disseminating reports to credit card companies, banks, employers, and landlords. It’s only recently that employers have been hit with a wave of lawsuits for allegedly violating the act.

So, what are employers being sued for?

Technicalities, mostly. Before running a background check on an applicant, according to the FCRA, an employer has to give notice and ask for authorization in a way that’s “clear and conspicuous” so it stands out from the rest of a job application, says Denise Trani-Morris, an employment lawyer at the Sedgwick firm in San Fracisco. Employers keep fumbling over that step. “They think, ‘Oh by the way, we’re an at-will employer, so we’ll just include that alongside the consent form. Aren’t we being good?’ No, actually, you just violated the law,” she says. “Or their application is online and it’s one big steady stream of information.” That too, she says, is illegal.

The nitty-gritty particulars don’t stop there. An employer must notify candidates if it plans to not hire them because of the results of a background check before actually doing so. That lag, in theory, should let applicants fix any errors in their consumer report before their candidacy is crippled completely.

These guidelines, while intricate, are nothing new, and that makes the recent slew of lawsuits all the more puzzling. Trani-Morris, who represents employers, attributes the trend to increasingly sophisticated plaintiffs lawyers who have identified the FCRA as a particularly vulnerable area that’s “ripe for class actions” and where “penalties are significant,” she says.

Retailers and restaurants seem to be favorite targets since their frequent hiring increases the potential pool of job applicants subjected to potentially illegal background checks. And the more people affected by an illegal practice, the more money’s at stake. Plus, Trani-Morris says, state and city laws pertaining to background checks complicate matters, especially for employers that outsource the job application process to third-party vendors.

In March, a class action lawsuit demanding $10 million filed in California accused Whole Foods of failing to provide applicants with a standalone disclosure form. (The court dismissed the case in October 2014.) Chuck E. Cheese was hit with a similar lawsuit in California in March (the case is ongoing). Panera was accused of the same violation in Florida in July, though the case has since been dismissed. That same month, current employees and job applicants sued Century 21 Department Stores in an ongoing case for running background checks without first obtaining their permission.

While retailers seem particularly susceptible they’re not the only ones getting sued. Last week, Paramount Pictures was slapped with a lawsuit for procuring a consumer report during the job search process without issuing a separate disclosure.

These lawsuits may come across as minor hairsplitting, but they’re costing companies real money.

In October, Dollar General agreed to pay $4 million to settle claims that it didn’t properly notify more than 200,000 job applicants of background checks. (The settlement is still subject to a February 25 fairness hearing.) Earlier last year, grocery chain Publix agreed to pay $6.8 million to settle claims that it violated the FCRA. In Publix’s case, the company was sued for burying the disclosure form alongside other application materials. In these cases, legal nitpicking paid off.

Learn more of the latest news about Dollar General from Fortune’s video team:

How corporate America is tackling unconscious bias

Equality is a worthy goal—but its tough to achieve when unconscious bias so pervades the American workplace.

Certainly women have made inroads in corporate America, but a Pew Research Center survey released Wednesday points at why women struggle to climb to the corporate world’s highest ranks—and often tone down their ideas, hide behind an agreeable facade or leave the workplace altogether.

Four out of 10 surveyed in the Pew study said that there are double standards for women seeking the highest levels of leadership in politics or business. They added that women have to outshine their male counterparts—and more than one-third of respondents believe the electorate and corporate America are not ready to put more women in top leadership positions. (See also: Management lessons from Sony’s gender pay gap.)

That conclusion comes as no surprise to Howard J. Ross, a diversity expert from Silver Spring, Md., who says “men are more likely, on television and elsewhere, to be seen in the workplace. It affects the way men see women and the way women see themselves.”

Ross, who addressed the issue in his recent book, Everyday Bias: Identifying and Navigating Unconscious Judgments in Our Daily Lives, says, “It’s not just men but women too who have ingrained expectations of workplace roles.”

Google’s GOOG disclosure last year that it has a 70% male workforce and its public effort to address that “deserves recognition,” says Ross. Google, along with companies like BAE Systems, Exel, Genentech, T. Rowe Price and Roche Diagnostics are among those who are moving to overcome their workplace biases, he said.

Learn more about how other tech companies are trying to increase diversity from Fortune’s video team:

One step some companies are taking when hiring? Stripping resumes of names and other identifying information and assigning numbers, Ross says.

Roche Diagnostics, a subsidiary of pharmaceutical giant Roche Group, is aiming to make its managers more aware of unconscious bias. It held two bias acquaintance sessions with its senior and middle managers in recent months and has plans for a third at its national sales meeting in late January.

“We are trying to ensure that our culture understands how bias exists everywhere, and being aware of it is critical,” says Bridget Boyle, Roche Diagnostics’ vice president of human resources.

In addition to ongoing training to highlight unconscious bias, the company broadened its recruitment and promotion policies in 2013. More than half of its lower level employees were women but their presence began to thin in middle management, Boyle says.

To spark change, the company instituted a mentor policy that has paired 150 sets of employees over 18 months. It’s also strengthening maternity and paternity benefits and assuring diverse slates of candidates for the 750-800 openings it fills each year, Boyle adds.

Royal Bank of Canada started an effort in May 2013 to raise awareness of bias among its 78,000 employees worldwide. Dr. Mahzarin Banaji, a Harvard University social ethics professor who co-authored Blind Spot: The Hidden Biases of Good People, has held sessions for about 1,000 of RBC’s executives to help alert them of their biases.

In addition to these meetings, employees have access to tests developed by Harvard to assess their unconscious biases and apply their personal findings in workshops. These sessions, says Norma Tombari, RBC’s director of global diversity, are continuing in 2015 as part of the company’s “entire talent management decision-making.” The program covers gender, race, disability and LGBT biases.

Despite such concerted efforts, change won’t be sudden, warns Gerard J. Holder, the author of Hidden Bias: How Unconscious Attitudes on Diversity Undermine Organizations and What to do about It. “We didn’t get conditioned overnight,” says Holder, who works with companies to help reeducate employees on their learned behaviors. “It’s a learning process that has to be done over a period of time, not a training that can be done in three hours.”

A transformed workforce may be a while away, but the Pew study did reveal several gems that hint at progress. Women won high rankings on key leadership traits like ambition and decisiveness. The respondents also said that women place more importance on intelligence and honesty than men do—and that those are essential leadership traits.

Two decades ago, the only way to book a flight was to call a travel agent, a middleman whose job was to connect you with vendors. That job is now obsolete, replaced by Internet-based services from billion-dollar companies like Priceline PCLN, TripAdvisor TRIP, and Expedia EXPE.

Parker Conrad wants to do the same thing to health insurance. Insurance brokers, the middlemen of the $884 billion insurance industry, charge a hefty fee for connecting individuals and businesses with the insurance providers. Conrad believes that service is unnecessary in today’s world, so he built Zenefits, a software startup, to cut them out.

It has quickly caught on. Eighteen months in, Zenefits has 2000 paying clients and 450 employees. The San Francisco-based company has signed a development deal with Arizona to add 1,300 jobs there in the next three years. A June funding round worth $66 million valued the young company at $500 million. That was just six months after its previous funding round, which investors called “the hottest deal in Silicon Valley.”

Zenefits’ software helps small businesses manage all of their human resources functions in one place, such as health insurance, payroll, retirement funds and equity grants. The company gives its software away for free, taking a commission from vendors like insurance providers or brokerages. Zenefits is on track to double its entire revenue in the last four months of this year; monthly revenue is slated to be 20 times higher than last year’s. Conrad says he can’t grow the company fast enough to meet demand.

Insurance providers have no problem with Zenefits, Conrad says, because the company sends them new clients. But the brokers—those middlemen from whom Zenefits is stealing commissions—face an obvious threat. (Zenefits is itself a licensed insurance broker.) One broker recently told the San Jose Mercury News that “every broker in the country is scared now of Zenefits.”

This week that threat manifested itself in the form of a regulatory fight: Utah has moved to ban Zenefits from offering its software for free in the state. Utah Insurance Commissioner Todd Kiser sent a letter to the company outlining the ways Zenefits is breaking the law by offering free software. Most states, including Utah, do not allow insurance brokers to offer rebates to customers to get them to buy insurance plans.

The state has asked Zenefits for a settlement fine of up to $97,000 with 24 months of probation, which would be waived if Zenefits began charging an acceptable fee for its software. A bulletin issued by the department in May outlines fair market value as determined by a survey of service providers in Western U.S. states. Charging a 500-person company $850 per year for full HR services is non-complaint because it is too low, the bulletin says. A more reasonable price for such services, according to the Department, adds up to tens of thousands of dollars.

Zenefits has stopped taking on new customers in Utah but continues to support existing ones while it makes its case to the Department.

“This whole thing is kind of bullshit,” Conrad tells Fortune. Other states, including Texas, Wisconsin, and Washington, have examined the Zenefits business model and decided it was legal. But Utah’s law regarding rebates is more explicit than other states, “by far,” according to a Utah state regulator who asked not to be named because the investigation is ongoing. For Zenefits to continue offering free software, it will have to get the law changed.

Conrad believes Utah’s commissioner Todd Kiser, who founded Kiser Insurance Agency, has been influenced by friends in the industry, and he intends to fight back. “I was picked on in middle school and one thing I learned was, if you’re dealing with a bully you’ve got to fight them and you’ve got to punch them in the face,” he says. “We’re right on the merits here.” Zenefits enlisted some high-profile friends to drum up support. Investor Marc Andreessen, whose firm led the most recent investment round in Zenefits, tweeted his support. So did actor, musician, and celebrity investor Jared Leto.

It is ironic, according to Conrad, that a government agency designed to protect consumers would use its power to make small businesses pay for a free service. “There is something kind of Kafka-esque about it,” he says. “This is just blatant overreaching where the regulator is trying to protect brokers from competition.”

Conrad believes insurance brokers should build their own software to compete with Zenefits, rather than try to get it banned. “In 10 years, there’s no way companies are going to be doing this stuff with a fax machine. It’s all going to be done with software,” he says. “All of the existing brokers today are all fucked.”

Update: Utah Governor Gary R. Herbert issued a statement regarding Zenefits that hints at a willingness to change the law:

“In Utah, we take very seriously our goal to lead the nation as the best performing economy and our reputation as the most business-friendly state. We also pride ourselves on our willingness to embrace innovation and have proactively eliminated outdated and unnecessary regulations. While we have to uphold the law on the books, there are times our laws must adapt to changes in the marketplace. With the legislative session just a few weeks away, I am willing to work with all stakeholders to ensure Utah has the right policy to embrace innovative ideas while protecting consumers.”

Cisco opens up about its struggle to diversify its workforce

On Wednesday, networking giant Cisco Systems CSCO released updated employee demographic data. It highlighted just how difficult it is for technology companies to increase the gender and ethnic diversity of their workforces.

Like most of its peers, Cisco’s workforce is overwhelmingly comprised of Caucasian and Asian men. A full 77% of its employee base is male, with 54% of total workers (male and female combined) identifying as Caucasian and 36% as Asian. The number of employees identifying as Hispanic and African American was 5% and 3%, respectively. For the first time, Cisco has also released the gender breakdown for specific roles, and the numbers there are even bleaker. A full 85% of the company’s technical roles are filled by men. When it comes to managers, just 19% are female.

Cisco does have a growing number of women on its executive leadership team. Just last week the company announced a new CFO, Kelly Kramer. She joins a handful of other women on the company’s management team, including chief technical and strategy officer Padmasree Warrior and chief information officer Rebecca Jacoby.

“The numbers are important to us but even more important are the conversations and changes we’re driving,” Francine Katsoudas, the company’s head of HR and another woman on the executive team, said in an interview earlier this week.

Last year, after meeting with Facebook COO (and creator of the Lean In women’s movement) Sheryl Sandberg, Cisco CEO John Chambers weighed in on the topic, asking each of his top managers to make diversifying the company’s workforce a priority. According to Katsoudas, Cisco is now experimenting with making sure there is a woman on every talent interviewing panel, so every perspective employee is interviewed by at least one female manager. Katsoudas believes this will help recruit more women.

Warrior, the company’s CTO, says she is most concerned about the lack of women in technical roles. With technology becoming more interdisciplinary, says Warrior, there are new fields opening up to women.

“We can do a lot more as an industry and as a company,” Warrior said in an interview with Fortune.

To that end, Warrior is personally mentoring women on her team. Like other technology companies, Cisco has formed internal groups for female employees (there’s even a group called Cisco Men Advocating Real Change) and partnered with organizations like Girls Who Code to train young women to love computer science. Earlier this year, the company also appointed Shari Slate as its chief inclusion and collaboration officer. So while the diversity numbers have yet to budge, Cisco has began putting more actions behind its desire to change them.

Warrior admits that Cisco’s numbers are nowhere near where she’d like them to be. But says the company is taking steps in the right direction. And Warrior’s not willing to wait another decade for more change.

“The worst thing for people to say is that it’s going to take time,” says Warrior. “In technology, we pride ourselves on the pace of change. Why can’t we talk about that same pace of change when it comes to women in leadership?”

“From the MPW Co-chairs” is a series where the editors who oversee the Fortune Most Powerful Women brand share their insights about women leaders.

A way to help HR professionals predict the future

This time around, it was cloud-based software provider Workday’s annual customer conference, which took place this week at San Francisco’s Moscone Center. The Pleasanton, Calif.-based company WDAY hasn’t been shy about its ambitions to branch out well beyond its roots in human resources tools. Workday has already gotten into the financial management software space and, earlier this week, announced a handful of new applications that utilize predictive analytics and big data, though most of these will still be used by HR professionals.

“The early wave of predictive analytics let us predict what might happen in the future,” Aneel Bhusri, co-founder and CEO of Workday, said in an interview with Fortune shortly after his keynote address at this week’s conference. “But now we can really recommend what people should do.”

How can predictive analytics be used when it comes to HR? Bhusri points to a scenario in which an HR manager would be notified when an employee is likely to leave their job. The new Workday apps cull data from both internal systems and outside sources like LinkedIn—an employee who is thinking of leaving is likely to update his or her profile page, which would then trigger a notification to the HR professional using the software, along with some recommendations for how to reduce the risk that the employee quits (offer leadership training, for example). This particular predictive app, one of six the company announced this week, is aptly called “Retention Risk.”

“The goal isn’t just to make transactions, it’s to make better decisions in the way you run your business,” Bhusri says. “If that’s not at the top of every executive’s priorities, then they shouldn’t be an executive.”

Workday’s not the only company trying to introduce predictive analytics into the world of HR software. Its traditional competitors like Oracle ORCL and SAP are also dabbling in the space and have each made large-scale acquisitions in HR tools, plus there is a growing number of startups entering the fray. In fact, Workday recently acquired one of those startups: Identified, the San Francisco-based company it snapped up earlier this year, is the backbone of its new “Insight Applications,” the suite of predictive analytics tools announced at this week’s conference.

Not all of the new applications are made for HR professionals, but Bhusri believes that is where the company will get the most traction, at least initially.

“It’s not surprising that a lot of the early use cases are around HR, because that’s where we have a bigger footprint,” Bhusri says.

Workday’s annual revenues are expected to reach $1 billion in its next fiscal year, but to keep growth on a stellar pace—and eventually turn a profit—the company will need to keep not only expanding its customer base but also its range of products. While predictive analytics capabilities are not necessarily a new standalone product, it’s a strong add-on to the company’s growing line of applications. Of course, it remains to be seen whether Workday can be as convincing in core financials and other enterprise applications that companies like SAP and Oracle were built on as they appear to be in HR software.

This item first appeared in the Nov. 7, 2014 edition of Data Sheet, Fortune’s daily newsletter on the business of technology. Sign up here.